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[Bullwinkle]

ISM factory index slips in Dec.
Tuesday, January 3, 2006 4:26:13 PM
http://www.afxpress.com


WASHINGTON (AFX) -- Factory activity in the United States decelerated in December after strong showings in the past three months, the Institute for Supply Management reported Tuesday. The ISM index fell to 54.2% in December from 58.1% in November. This is the biggest monthly decline since July 2002. The decline was larger than expected. The consensus of estimates collected by MarketWatch called for a modest decline in the index to 57.6% in December. Stock market gains wilted after the ISM report was released. The dollar fell to its lowest level of the trading day and bonds pared early declines on the sense that the factory sector was moderating

Norbert J. Ore, chair of the ISM manufacturing business survey committee, said the decline was natural after three strong months and that the factory sector retains significant momentum going into 2006

Economists cautiously agreed with the assessment

"We can't see any good reason why this should mark the start of a sustained softening in the ISM, but another softish report next month would be worrying," said Ian Shepherdson, chief U.S. economist at High Frequency Economics

The ISM manufacturing index moved from "torrid to healthy territory," said Stephen Stanley, chief economist at RBS Greenwich Capital. Details of the report In December, most of the major sub-indexes declined

New orders fell to 55.5% in December from 59.8% in November

Production slipped to 57.0% from 60.6%

Backlog of orders fell to 49.5% in December from 53.0% in November

Inventories fell to 47.2% in December from 49.3% in the previous month

The employment index fell to 52.7% from 56.6% in November. Inflation pressure moderated somewhat in December on lower energy prices

The price index fell to 63.0% from 74.0% in the previous month. This was the lowest price index since before the hurricanes struck the Gulf Coast in late August and September

The trade group surveys the purchasing managers at factories around the country. A reading above 50 signals expansion, while a reading below 50 indicates contraction. The index has been above 50 since May 2003

Separately, construction spending was reported up 0.2% in November, the Commerce Department said

This story was supplied by MarketWatch. For further information see www.marketwatch.com

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